Legal & Regulatory Aspects of Banking - Indemnities Unit - 10 : Indemnities The word indemnity means ' to save from losses '. This loss could be either due to the act of party giving the indemnity or due to the act of a third party .
CONTRACT OF INDEMNITY : Section 124 of Indian Contract Act, 1872 defines - ' A Contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself , or by the conduct of any other person '.
Difference between INDEMNITY CONTRACT and GUARANTEE Indemnity Guarantee 1) Number of Parties to the contract of Indemnity Two Three 2) Contingent Risk Contingent Subsisting 3) Nature of liability Indemnifier Debtor 4) Number of Contracts 1 3 5) Purpose of contract Reimburse Creditor's loss Security
SectionDescription 124 Contract of Indemnity :A contract by which one party promises to save the other from loss caused by him by the conduct of the promisor himself, or by the conduct of any other person. Person giving the promise is called the Indemnifier and the person whom the promise is made is called the Indemnified or Indemnity Holder. 125 Rights of an Indemnity Holder when sued : The promisee in a contract of Indemnity, acting within the scope of his authority, is entitled to recover from the promisor – All damages which he may be compelled to pay in any suit, all costs, all sums. Above Rights of an Indemnify Holder is subject to: His acting within the scope of his authority He does not contravene the specific directions of the promisor